When the economy falls apart, working families bear the brunt of the impact at every single stage of the crisis. We are the canaries in the coalmine, watching real wages stagnate over several decades as workers’ bargaining power erodes in the face of attacks on unions and flawed globalization policies. It is our retirement savings that vanish and our dreams of homeownership that fade when the financial deregulation experiment collapses, the housing market implodes and the banks fail. And we get the pink slips when business realizes there is no consumer engine left to drive our weak economy.
We must also be right there at the table when our government finally takes action to address the crisis and when taxpayer funds are spent. This week, labor leaders of the G-20 countries are meeting in Washington in advance of the economic summit convened by outgoing President George W. Bush with his G-20 counterparts. Today the global union leaders issued a joint declaration outlining a shared labor position addressing the global financial crisis. The global unions’ statement is available at: http://www.ituc-csi.org/IMG/pdf/0811t_gf_G20.pdf
We join with our brothers and sisters around the world in calling on our governments to act in a timely, substantial and coordinated way in order to reduce the depth and duration of the global economic crisis.
But government action must address the underlying root causes of the crisis as well as the immediate financial meltdown. Here in the United States, we must renew our economic foundation, rebuild our middle class, reform our broken health care system, restore integrity to our capital markets and invest in our own productive capacity if the economic recovery is to be robust and sustainable.
There are four key elements outlined in the Global Union statement, and each is important.
The first priority must be a coordinated recovery plan for the real economy and a systematic plan for sustained investment in improving the productivity of the U.S. economy over the long term. We learned last week that unemployment hit 6.5% in October, and we have lost 1.2 million jobs since January – with manufacturing and construction especially hard hit. This year more than one million Americans will likely lose their homes to foreclosure and one million unemployed workers will exhaust their benefits. In the last year, trillions of dollars of household wealth in home values, stocks, and retirement funds have evaporated. All indicators point to a long and deep recession.
We urge Congress to act immediately on a substantial emergency economic recovery package. We believe that in order to be effective, such a package should be large enough to offset the projected economic contraction – 3% of GDP, or around $450 billion. This major investment is necessary to carry out a fundamental reorientation to a productive economy from an asset-bubble economy. Just as the Treasury Department has requested flexibility to reshape and rescale the financial bailout package, we should remain flexible with respect to the economic recovery package, amending or augmenting it as necessary, given economic developments. And just as Congress did not flinch from allocating the funds deemed necessary to bail out the financial sector, likewise there should be no hesitation to ensure that the needed fiscal stimulus for Main Street includes the appropriate elements, has proper oversight and is of a scale adequate to address the economic crisis.
The economic recovery package should focus on helping people in need and making tangible expenditures on improving productivity and efficiency. To that end, it should include extension of unemployment insurance benefits and food stamps to help those most vulnerable to the downturn. It should include substantial state and local fiscal relief to ensure that states and localities can continue to provide vitally needed education, health care, public safety, and other services and jobs. This can most effectively be done by increasing the federal match under Medicaid and community development block grants, as well as continuing education funding.
The recovery plan should expedite needed infrastructure spending and clean energy investments to create good jobs at home, transition to greater energy efficiency and rebuild our crucial manufacturing sector. In order to maximize the positive job impact of infrastructure and clean energy investments, stringent Buy America provisions must be an integral part of the package. In order to prevent the collapse of the crucial automotive sector, the recovery package should include an immediate infusion of capital into the auto companies so they can maintain their U.S. job base, along with assistance to enable the companies to meet their obligations to fund retiree health care benefits. The recovery package should also stabilize American workers’ retirement security by providing relief to pension plan sponsors facing funding shortfalls because of the economic downturn. It is also essential that the government step in to help families stay in their homes and restructure their mortgages.
Because of the urgency of the economic crisis facing working families, Congress should enact the economic recovery package during this month’s lame duck session. If that essential step is blocked by the White House or Republican leadership, the recovery package should be taken up immediately next year, as a top priority for the new administration.
The G-20 leaders’ meeting should also address how to coordinate fiscal stimulus internationally, and should attempt to reach agreement on coordination of interest rate cuts, if possible.
Beyond the immediate need for an economic recovery package, it is also essential that our government begin – in a systematic way – to address our national deficits in modern energy-efficient infrastructure, workforce development, and universal health care. We cannot expect to compete successfully in a dynamic and quickly evolving global economy as a high-wage country if we fail to make these crucial investments.
A National Competitiveness Agenda would close the current $1.7 trillion infrastructure deficit by investing in a world-class infrastructure to prepare for the economy of the future. These investments would include information and communications, schools, water systems and transportation. And we should develop an innovation strategy to harness the advantage of our universities and research labs and make them more useful to businesses competing in the global economy.
A competitiveness strategy must also focus on creating a world-class work force by educating our youth to the limits of their ability and interest and by training our workforce – active and displaced – to be able to perform the most value-added jobs of which they are capable. We need to equip workers with a wide range of transferable skills that help them obtain employment, move up available career ladders, function effectively in high performance work environments, and adjust to plant closings and layoffs. Skill development programs can improve labor-management relations, boost productivity, and strengthen employment security and mobility for workers.
Comprehensive health care reform, anchored in a new public insurance program, to control health care costs and extend coverage to all, will also help boost the economy by lessening the pressure on workers’ wages, as well as employers’ cost of doing business.
The second element of addressing the economic crisis should be re-regulation of global financial markets as a quid pro quo for government intervention to save banks and insurance companies. The deregulation of capital markets, excessive leverage in money center banks and the proliferation of complex and opaque financial products has precipitated this global financial crisis.
We must restore integrity to our capital markets through fundamental reform of our financial regulations. This must include: a revitalized Securities and Exchange Commission, public accountability of central banks, counter-cyclical asset requirements and public supervision for banks, regulation of hedge funds and private equity, reform and control of executive compensation, reform of the credit rating industry, an end to offshore tax havens, proper consumer protection against predatory lending and aggressive banking sales policy and active housing and community-based financial service public policies.
In addition, we urge the G-20 leaders to explore the feasibility of instituting a financial transactions fee, as proposed by President-elect Obama during the campaign. Such a fee – even if set at a very modest level – could potentially yield revenues of as much as $100 billion annually. These revenues could be used to offset the expenses of the Wall Street bailout or to help fund the economic recovery package. Ideally, such a fee would be instituted by all the major economies in a coordinated fashion.
Third, we must establish a new structure of economic governance for the global economy. The Global Unions’ statement calls for reshaping the global financial and economic architecture through new negotiations that go beyond the exchange rate regime created at Bretton Woods in 1944. Trade unions must have a seat at the table during these discussions to ensure that the interests of working families across the globe are addressed. Such talks should address how best to reduce imbalances in the global economy through reform of international trade rules and institutions, by rethinking the mission and role of the international financial institutions, and by improving transparency and accountability throughout the international institutions. In particular, the International Monetary Fund must develop more effective mechanisms to address gross distortions in global trade flows that have occurred as a result of currency imbalances.
Fourth – and most important – we need to get to the heart of the problem by addressing the explosion of inequality in income distribution that lies behind the crisis. The Global Unions’ statement calls for ensuring “more balanced growth in the global economy between regions, as well as within countries, between capital and labour, between high and low income earners, between rich and poor, and between men and women.”
Wage stagnation and eroding bargaining power for workers are both a result of bad policies and a major factor behind the decline in household savings and the explosion of debt that precipitated the mortgage crisis. Financial deregulation exacerbated the problem by facilitating borrowing against home equity when income growth was inadequate. When the housing bubble burst, the entire house of cards came tumbling down.
It should be clear now that we cannot sustain a healthy consumer-driven economy on the basis of low wages, burgeoning debt and asset bubbles. We need to rebuild the real economy, and we need to rebalance bargaining power – especially between workers and employers.
Here in the United States, passing and implementing the Employee Free Choice Act is an integral element to renewing our economy – not just for the next six months, but for our future. The Employee Free Choice Act levels the playing field to protect workers’ freedom to form unions and bargain for better wages and benefits – free of harassment and intimidation.
Under today’s broken labor laws, working people are powerless to bargain for decent wages – while CEOs demand lavish contracts and benefits for themselves and get golden parachutes for driving their companies into the ground.
At the moment when our economy has collapsed – the result of excessive corporate power and grotesque levels of inequality – we must recognize that restoring and protecting workers’ freedom to choose a union is the key to helping working people counterbalance corporate power and rebuild our middle class.
As Barack Obama said in Golden, Colorado, on September 16th, when the crisis unfolded: “What we’ve seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed.” Our job is to turn this final verdict into a coherent and comprehensive economic renewal program for our country, and to do so in coordination with our allies around the world.